Business Combinations

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure

2.       Business combinations

Acquisition of SARcode Bioscience Inc.(“SARcode”)

On April 17, 2013 Shire completed the acquisition of 100% of the outstanding share capital of SARcode. The acquisition date fair value of the consideration totaled $368 million, comprising cash consideration paid on closing of $151 million and the fair value of contingent consideration payable of $217 million. The maximum amount of contingent cash consideration which may be payable by Shire in future periods is $525 million dependent upon achievement of certain clinical, regulatory and net sales milestones.

This acquisition brings the new Phase 3 compound, Lifitegrast, currently under development for the signs and symptoms of dry eye disease, into Shire's portfolio. Shire anticipates launching Lifitegrast in the United States as early as 2016 pending a positive outcome of the Phase 3 clinical development program and regulatory approvals. Shire is acquiring the global rights to Lifitegrast and will evaluate an appropriate regulatory filing strategy for markets outside of the United States.

The acquisition of SARcode has been accounted as a business combination using the acquisition method. The assets and liabilities assumed from SARcode have been recorded at their preliminary fair values at the date of acquisition, being April 17, 2013. The Company's consolidated financial statement and results of operations include the result of SARcode from April 17, 2013.

The purchase price allocation is preliminary pending the determination of the fair values of certain assets and liabilities assumed. The purchase price has been allocated on a preliminary basis to acquired in process research and development (“IPR&D”) in respect of Lifitegrast ($412 million), net current liabilities assumed ($8.2 million), net non-current liabilities assumed (including deferred tax liabilities) ($122.4 million) and goodwill ($86.6 million). The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date. Goodwill arising of $86.6 million, which is not deductible for tax purposes, has been assigned to the SP operating segment.Goodwill includes the value of the assembled workforce and the related scientific expertise in ophthalmology which allows for potential expansion into a new therapeutic area.

In the six months to June 30, 2013 the Company has expensed costs of $4.6 million (2012: $nil) relating to the SARcode acquisition, which have been recorded within integration and acquisition costs in the Company's consolidated income statement.

Acquisition of Premacure AB (“Premacure”)

On March 8, 2013 Shire completed the acquisition of 100% of the outstanding share capital of Premacure. The acquisition date fair value of the consideration totaled $140.2 million, comprising cash consideration paid on closing of $30.6 million, and the fair value of contingent consideration payable of $109.6 million. The maximum amount of contingent cash consideration which may be payable by Shire in future periods, dependent upon the successful completion of certain development and commercial milestones, is $169 million. Shire will also pay royalties on relevant net sales.

Premacure is developing a protein replacement therapy(“PREMIPLEX”), currently in Phase 2 development, for the prevention of Retinopathy of Prematurity (“ROP”). ROP is a rare and potentially blinding eye disorder that primarily affects premature infants and is one of the most common causes of visual loss in childhood. Together, the acquisitions of SARcode and Premacure build Shire's presence in the ophthalmology therapeutic area.

The acquisition of Premacure has been accounted for as a business combinationusing the acquisition method. The assets and the liabilities assumed from Premacure have been recorded at their preliminary fair values at the date of acquisition, being March 8, 2013. The Company's consolidated financial statements and results of operations include the results of Premacure from March 8, 2013.

The purchase price allocation is preliminary pending final determination of the fair values of certain assets acquired and liabilities assumed. The purchase price has been allocated on a preliminary basis to acquired IPR&D in respect of PREMIPLEX ($151.8 million), net current liabilities assumed ($11.7 million), net non-current liabilities assumed (including deferred tax liabilities) ($29.5 million) and goodwill ($29.6 million). The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date. Goodwill arising of $29.6 million, which is not deductible for tax purposes, has been assigned to the HGT operating segment.

In the six months to June 30, 2013 the Company expensed costs of $4.2 million (2012: nil) relating to the Premacure acquisition, which have been recorded within integration and acquisition costs in the Company's consolidated income statement.

Acquisition of Lotus Tissue Repair, Inc (“Lotus”)

On February12, 2013 Shire completed the acquisition of 100% of the outstanding share capital ofLotus.The acquisition date fair value of consideration totaled $174.2 million, comprising cash consideration paid on closing of $49.4 million, and the fair value of contingent consideration payable of $124.8 million. The maximum amount of contingent cash consideration which may be payable by Shire in future periods is $275 million.The amount of contingent cash consideration ultimately payable by Shire is dependent upon achievement of certain pre-clinical and clinical development milestones.

Lotus is developing a proprietary recombinant form of human collagen Type VII (“rC7”) as the first and only intravenous protein replacement therapy currently being investigated for the treatment of Dystrophic EpidermolysisBullosa (“DEB”).  DEB is a devastating orphan disease for which there is no currently approved treatment option other than palliative care. The acquisition adds to Shire's pipeline a late stage pre-clinical product for the treatment of DEB with global rights. This acquisition is complementary to Shire's existing investment in developing ABH001, which is currently being investigated as a dermal substitute therapy for the treatment of non-healing wounds in patients with EpidermolysisBullosa (“EB”).

The acquisition of Lotus has been accounted for as a business combination using the acquisition method. The assets and the liabilities assumed from Lotus have been recorded at their preliminary fair values at the date of acquisition, being February 12, 2013. The Company's consolidated financial statements and results of operations include the results of Lotus from February 12, 2013.

The purchase price allocation is preliminary pending final determination of the fair values of certain assets acquired and liabilities assumed. The purchase price has been allocated on a preliminary basis to acquired IPR&D in respect of rC7 ($176.7 million), net current assets assumed ($6.8 million), net non-current liabilities assumed (including deferred tax liabilities) ($63.4 million) and goodwill ($54.1 million). The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date. Goodwill arising of $54.1 million, which is not deductible for tax purposes, has been assigned to the HGT operating segment.

In the six months to June 30, 2013 the Company expensed costs of $3.7 million (2012: $nil) relating to the Lotus acquisition, which have been recorded within integration and acquisition costs in the Company's consolidated income statement.

Supplemental disclosure of proforma information

The unaudited pro forma financial information to present the combined results of the operations of Shire, SARcodePremacure andLotusare not provided as the collective impacts of these acquisitions were not material to the Company's results of operations for any period presented.